"It would be a shock to the economy. It would shock investors, which could turn into panic and cause the housing bubble to burst," Mr Ameer told The Australian Financial Review.

All of Mr Ameer's investment are in existing properties, as are those he advises his clients to purchase. He said changes to negative gearing would hit property values and also affect the wider economy.

But, the Sri-Lankan born self-made millionaire, who now runs wealth-creation mentoring business Dream Design Property, said there should be a limit on excessive use of negative gearing, the policy approach favoured by Federal Treasurer Scott Morrison, and expected to be unveiled in more detail on Wednesday.

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"I haven't bought properties just to negatively gear them and get the tax refund," Mr Ameer, a former finance officer at Westpac, said. "The whole point of investment is to make income and to pay tax. But if you are negatively gearing everything simply to make a loss, that should be capped."

Investor and Sydney buyers' agent Rich Harvey, CEO of propertybuyer.com.au, said the problem with the Labor proposal was that it would skew the investment market towards buying buying brand new homes, which is "not necessarily the best investment strategy".

"It's really hard to find good quality developments that stack up from an investment perspective," he said. "For our business, it would be a very negative thing because 90-95 per cent of our clients invest in established property.

Getting rich off tax breaks

"There's lot of issues for mum and dad investors if they are buying off-the-plan. You're also paying the developer margin. So you're incentivising behaviour one way or the other," he said.

Investment adviser, Margaret Lomas, who owns a "a lot of investment property" which she acquired negatively geared (over time the properties have become neutral or positively geared) said negative gearing should not be tampered with because it would reduce the ability of ordinary baby boomers – not the rich – to create retirement income.

"Brand new properties come at a premium, but existing property is affordable and achievable. To create just enough wealth to cover what an aged pension otherwise would, these average mums and dads need to buy around six properties and keep them for 15 years. That's hardly people getting rich off tax breaks," she said.

Ms Lomas warned another side effect of the Labor proposal would be to open the flood gates for more spruikers to sell over-priced property. "A better strategy is to bring back attractive first homeowner grants to encourage people to buy rather than rent," she said.

Professional investor Nathan Birch, who recently acquired his 200th investment properties, and has amassed a positively geared portfolio worth more than $40 million, called Labor's planned changes to negative gearing a stunt that would backfire on them at this year's Federal Election.

"Investors will have to come up with the extra cash flow so the whole market will raise their rents to make up the shortfall. I will advise my clients to raise their rent and I will do the same," he said.

He conceded the changes would put the brakes on some property markets and stop prices from exploding. But, he said, investors would just shift to more "cash-flow positive" markets like Queensland instead.

"The biggest losers will be the poor families trying to get into rental properties," Mr Birch said.